Were Hedge Funds Right About Crown Castle International Corp. (CCI)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Crown Castle International Corp. (NYSE:CCI).

Is Crown Castle International Corp. (NYSE:CCI) a splendid investment now? Prominent investors were taking an optimistic view. The number of bullish hedge fund positions went up by 3 recently. Crown Castle International Corp. (NYSE:CCI) was in 43 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 47. Our calculations also showed that CCI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 best artificial intelligence stocks to pick the best growth stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind we’re going to go over the new hedge fund action encompassing Crown Castle International Corp. (NYSE:CCI).

What does smart money think about Crown Castle International Corp. (NYSE:CCI)?

At second quarter’s end, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CCI over the last 20 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Bill & Melinda Gates Foundation Trust was the largest shareholder of Crown Castle International Corp. (NYSE:CCI), with a stake worth $892.5 million reported as of the end of September. Trailing Bill & Melinda Gates Foundation Trust was Fisher Asset Management, which amassed a stake valued at $305.7 million. D E Shaw, Weiss Asset Management, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Skylands Capital allocated the biggest weight to Crown Castle International Corp. (NYSE:CCI), around 10.38% of its 13F portfolio. Courage Capital is also relatively very bullish on the stock, dishing out 10.17 percent of its 13F equity portfolio to CCI.

As industrywide interest jumped, some big names were leading the bulls’ herd. Fisher Asset Management, managed by Ken Fisher, assembled the biggest position in Crown Castle International Corp. (NYSE:CCI). Fisher Asset Management had $305.7 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $14.3 million investment in the stock during the quarter. The following funds were also among the new CCI investors: Joe DiMenna’s ZWEIG DIMENNA PARTNERS, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Richard C. Patton’s Courage Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Crown Castle International Corp. (NYSE:CCI) but similarly valued. These stocks are Cigna Corporation (NYSE:CI), Prologis Inc (NYSE:PLD), Caterpillar Inc. (NYSE:CAT), Dominion Energy Inc. (NYSE:D), Goldman Sachs Group, Inc. (NYSE:GS), The Estee Lauder Companies Inc (NYSE:EL), and The Blackstone Group Inc. (NYSE:BX). This group of stocks’ market valuations are closest to CCI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CI 72 2871074 -2
PLD 35 433481 -5
CAT 39 2667687 5
D 33 366229 -1
GS 69 3543027 -5
EL 46 1197830 2
BX 47 1434341 -2
Average 48.7 1787667 -1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 48.7 hedge funds with bullish positions and the average amount invested in these stocks was $1788 million. That figure was $1988 million in CCI’s case. Cigna Corporation (NYSE:CI) is the most popular stock in this table. On the other hand Dominion Energy Inc. (NYSE:D) is the least popular one with only 33 bullish hedge fund positions. Crown Castle International Corp. (NYSE:CCI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CCI is 48.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 30% in 2020 through October 23rd and surpassed the market by 21 percentage points. Unfortunately CCI wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CCI investors were disappointed as the stock returned -4.6% since the end of June (through 10/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.